Wednesday, 7 July 2004

Scotland and London

A few days ago I wrote about the Shirley Porter affair and said that Glasgow was one of the poorest cities in the UK.

Stuart Dickson pointed out that Glasgow was in fact the poorest British city. David Rainey responded by drawing our attention to this:

...the Sheffield study analysed the census data in blocks of Local Authorities structures. Accordingly, Glasgow City council was a single unit in the study and did very poorly. However, in England (London, especially) the Local councils are smaller and often many are needed to cover an entire city.

This means that many London Boroughs (as opposed to the whole city) are in the poorest categories. Even Westminster is "deprived" with almost 40% of its population in "poverty".

Nevertheless, I don't see how anyone can deny the fact that the southeast of England dominates the UK economy in an unhealthy way. I know that Scotland is just about average in the UK in terms of GDP per capita (with northern England being much less productive) but we are exporting a very high proportion of our qualified young people to London and its surroundings. That shouldn't be necessary and our population is now declining and ageing.

I normally agree with most of the commentary from the Scotsman'sGeorge Kerevan. In his article George maintains that London's dominance is primarily due to its competitive private sector and not to its capital status:

How did London achieve this spectacular growth, and why did other UK cities fail to emulate it? One theory is that London was especially privileged by being the political capital of the UK. Over 90 per cent of the UN’s 185 member countries have an embassy or high commission there. London also hosts 14 international organisations, including the European Bank for Reconstruction and Development and the Commonwealth Secretariat. London attracts company head offices anxious to be close to the centre of things. It is home to more corporate HQs than any other European city: 33 per cent of the Fortune Global 500 firms have their European HQ in the city, compared with only 9 per cent in Paris and 3 per cent in Frankfurt.

However, the balance of the evidence suggests that London’s political clout stems from its economic weight and not the other way around. Contrary to popular mythology, only 18.4 per cent of all UK civil servants work in London.

I don't really agree with George on this. Taking the civil service numbers for a start, London's population share would entitle it to more like 13% of the UK total so already it's about 40% ahead of the game. But what's really important is that London is the base of the civil servants who matter. The Sir Humphreys are there, not the junior clerks relocated to the "provinces". That's why almost all of the UK's top companies are headquartered in London - far more than in any one city in the USA or Germany. In turn it makes commercial sense for all of those highly paid creative industries described by George to be in London too.

There is a fascinating article in the latest issue of the IEA'sEconomic Affairs. Victoria Curzon Price writes that:

Switzerland has a tradition of decentralised government, decentralised tax setting and direct reference to the voters through referendums. Such mechanisms should give rise to lower taxes, better provision of public goods and higher economic growth. However, these mechanisms have not been effective in the last 30 years at preventing the growth in government spending and centralisation. This is partly because of the consensus in favour of centralisation that exists among institutionalised politicians. The performance of the Swiss economy since 1970 has consequently been dismal. Real per capita post-tax incomes have been stagnant. There is now an opportunity for the growth of centralisation to be reversed.

The article maintains that the Swiss economy has suffered from the transfer of power and tax collecting from the cantons to the federal government. Compared to the UK, Switzerland remains very decentralised but it's clearly been moving in the wrong direction. Elsewhere in the article a chart shows that the proportion of UK taxes collected centrally has risen from 71% in 1975 to 79% in 2000. Of the 19 countries listed only Ireland (a geographically small country) collects more at the centre. The German federal government collects a mere 31% of all the country's tax (down from 34% in 1975) - the rest being collected at the land or local level. Even France collects only 48% of its tax take nationally.

I remain convinced that British national life (think of our transport "system") is distorted by the dominance of the southeast. This in turn is largely the result of more than 40% of the economy being under state control and being almost entirely run from one end of a long and narrow country. My own preference is for that 40% to be reduced to more like 4%. Then it wouldn't matter too much where the capital was located - just like Switzerland in its good old days. If we don't want to fire all of those public servants we should move the capital to the other end of the country. Sir Humphrey will enjoy living in Easterhouse.

2 comments:

Andrew Duffin (213.206.148.225) " If we don't want to fire all of those public servants... "

But David, we DO want to fire them all.

Don't we?

19 July 2004, 13:01:51 GMT+01:00– Like – Reply – Edit – Moderate

David Farrer (62.49.21.253) According to the BBC's website today:

"Northern house prices surge ahead The top ten property hotspots during the past year were all in the north and west of the UK, according to research from the Halifax."

Not so.

Of the 10 towns listed, 5 are the southern half of the UK. The BBC is a major culprit in the "Londonisation" of the country. From their perspective, anything beyond the North Circular Road is in "The North".

10 July 2004, 07:09:48 GMT+01:00– Like – Reply – Edit – Moderate

David Farrer (62.49.21.253) Simon

Yes, I forgot to mention that. If the capital were at the other end of the country (which actually means Wick, not Glasgow!) it would after a while pull development towards the north. But you'd never get a mirror image of the present situation because of the southeast's locational advantage.

9 July 2004, 19:38:48 GMT+01:00– Like – Reply – Edit – Moderate

Gawain (83.134.30.102) Staurat

I agree 95%. But the chaps who run the Euro would ban you from doing any of the stuff that I agree with. Rats back to the drawing board.

9 July 2004, 16:12:22 GMT+01:00– Like – Reply – Edit – Moderate

Simon Jester (193.118.251.61) As well as the points David made, there is another consideration: the southeast of England is physically closer to most of the UK's single largest overseas market - the (rest of the) EU.

Some people are inclined to dismiss the importance of such proximity. In the days when trade was mainly with the Empire, the Commonwealth and the Americas, such considerations were relatively trivial - when dealing with distances of several thousands of miles, how much difference does a couple of extra hundred make? In fact, London was effectively more distant from the end markets then - West Coast cities were better positioned for such trading.

However, these days the difference can be between a few dozen miles and a few hundred miles - and most overseas trade goes round the M25!

Extending trade links outside the EU would help to reverse this problem.

Steve Shackleton (212.117.228.125) I think that the worries about the south east stripping skilled workers from the rest of the UK is overblown. These are individuals making choices about their own lives and futures and should be encouraged to do so. Employers should be free to set up and employ people in whatever part of the UK (or world) that suits them best. If unions have destroyed pay differentials by national bargaining, and the tories by nationalising business rates, they haven't helped and reversing these may alleviate the problem. Until the regions have the ability and the wherewithal to change and make themselves attractive to real investment not govt subsidies this will continue.

The introduction local funding and accountablility would be a good place to start but the people behind and within the regions need to realise that nimbyism and intervention are not whats needed

9 July 2004, 12:28:02 GMT+01:00– Like – Reply – Edit – Moderate

Neil (195.93.34.10) I also think you argued the case better than Mr Kerevan, David. The assumption that London is inherently more enterprising would need some proof - indeed the very fact that so many Scots (& others) head there to get the jobs strongly suggests the locals are not particularly progressive.

One effect of the Londonisation of government is that large businesses that depend to a greater or lesser extent on lobbying Sir Humphrey (ie almost all of them) tend to locate within lunching distance of him. This effect is also very noticeable in Edinburgh which is not undergoing it's renaissance because of the low housing/office prices or uncluttered infrastructure.

Mind you I remember pointing out some time ago that according to some figures you posted here the average difference in incomes between Scotland & London was actually marginally less the difference in cost of living so we needn't feel to hard done by.

7 July 2004, 21:41:12 GMT+01:00– Like – Reply – Edit – Moderate

Stuart Dickson (217.211.160.56) Intelligent and informative analysis.

George Kerevan is not usually guilty of pulling his punches. Damn fine chap.

In theory Liverpool, Stirling or Swansea would make far more sensible, and cheaper, capitals of the UK. (But funnily enough not Newry!) But it ain't gonna happen.

Let the English get on with subsidising their greedy capital off their own backs. We should make a fresh start and recreate in Edinburgh a proper capital city, not simply in name, but in substance.

Abolish council tax, have 80% of council funds raised by local (income and sales) taxes, instead of 20%.

Abolish the Barnett formula and re-establish the Scottish Exchequer to set and collect all taxes in Scotland, including our "Continental Shelf" ie. oil taxes.

First tasks for first Scots Chancellor in nearly 300 years: lower corporation tax; abolish capital gains and inheritance tax; abolish entire social security and state pension system and replace with a generous non means tested, flat-rate tax credit to every citizen; and join the Euro.